Legal Framework for Arbitration Introduced - International Law Office

August 2004 marked the second anniversary of El Salvador's first unified statute on alternative dispute resolution (ADR), the Law on Conciliation, Mediation and Arbitration.

The new law unified the discrete regulations on arbitration and conciliation in a single piece of legislation, and introduced an entirely new statute on mediation.

A key aim of the law is to help create a more favourable legal environment for foreign transactions and investment. To this end, it recognizes universal principles of arbitration which will make this form of ADR available in most transnational contracts concluded with Salvadoran companies.

The most fundamental principle expressly acknowledged in the law is the parties' freedom to adopt any means of ADR. This extends not only to the method itself, but also to the applicable rules and the forum, which in turn have a bearing on the applicable law or proper law.

The principle of flexibility allows the parties to avail of informal, adaptable and simple procedures which are tailored to the particular needs of the dispute.

Under the principle of privacy, ADR proceedings must be kept confidential. However, in the case of institutional arbitrations held in El Salvador, the law provides that the Ministry of Home Affairs will keep a register of certain types of awards. In addition, in the case of ad hoc arbitration, the law requires that the award be transcribed before a notary public.

The principle of capability requires that any person performing the functions of an arbitrator or mediator must be qualified to act as such. The law does not specify the qualifications which such persons must hold, although it does provide that local arbitration centres must maintain a panel of arbitrators, from which disputing parties may make their appointments. However, it is not clear how qualifications in the legal sense will be established in ad hoc arbitration.

The arbitrators are bound to conduct the proceedings swiftly, a requirement which allows them to decide procedural matters in such a way as avoids hindering the progress of the dispute resolution.

Under the principle of equality, the parties must be given the same opportunities to exercise all their rights throughout the proceedings.

All proceedings are subject to the principle of orality. This provision seems out of line with more recently developed systems, such as documents-only and online arbitration, and there appears to have been no specific motive for its inclusion as a general principle.

The adversarial principle requires that the parties be allowed to confront one another before the tribunal.

The legislature had the best intentions in its efforts to define a principled framework for arbitration. However, this framework should not restrict the application of other principles developed through the rich international arbitration practice and jurisprudence.

As El Salvador is taking its first steps towards the development of arbitration, the business and academic sectors have some way to go in working with these principles to establish a reliable ADR environment.

For further information on this topic please contact Ricardo A Cevallos or Rodolfo Perez or Omar Martínez at Delgado & Cevallos by telephone (+503 298 3900) or by fax (+503 298 3939) or by email (rcevallos@delgadocevallos.com or rperez@delgadocevallos.com or omartinez@delgadocevallos.com).